Interrupter CheckmarkInterrupter IconFacebookGoogle PlusInstagramGroupRamsey SolutionsTwitterYouTubeExpand MenuStoreCloseSearchExpand MenuBackStoreSign in

Ask Dave

Buy A House For College Bound Sister?

Adam has custody of his 17-year-old sister. She's about to go to college and has $800,000 in inheritance. Should Adam pay for her college and buy a house for her to live in?

QUESTION: Adam in Mississippi has custody of his 17-year-old sister after their parents passed away. She’s about to go to college in May and has $800,000 in inheritance. Should Adam pay for her college out of that money and buy a house for her to live in? Adam makes $375,000 a year. Dave talks it through with Adam.

ANSWER: What is good for her when she’s 30? What gets her there and keeps her there in addition to not having the debt from you having paid for college, it’s important that she learn how to work and save and budget her money, so we have to teach her skills as well as give her money. When you give people money and don’t give them skills, you make them into a problem.

I have chosen with three kids who have gone through school over a 10-year period of time to rent. I didn’t buy for them. It was easier to let them have an apartment or get a house with some buddies or do those kinds of things because I can’t remember one of them living in the same place a single year. It was four years and four locations. I think my son is on the same track. He may actually extend that and live in one place more than one year. It could happen with him, but the girls lived in a different dorm or a different apartment every year for four years of school. I wouldn’t buy it.

I would rent, but I would pay for her college. If you want to pay for her rent, that’s fine, and pay for her college. You’ve got the money. You’re in great shape to do that. But let’s make sure she learns to work and manages money well during that time and doesn’t see this as somehow an obligation from you. She needs to have a sense of gratitude—not a sense of entitlement. That’s a demand of this. That’s a demand of my children. It’s okay for her to pay for part of it. I really wouldn’t buy a house, though. I would let her inheritance stay invested and then you sit down with her and develop what she feels like is a good budget and what you feel like is a good budget. If you can manage for her to work and you help her a little bit with in-state tuition, she lives modestly, and she works her way through part of it and you choose to pay part of it, she’s set for life if she comes out with a college education and $1 million, which it will be by the time she graduates.

What I’m always concerned about with kids with money is that they learn gratitude and work ethic. If they can learn those two things, then money doesn’t ruin them. As her older brother acting parentally right now, if I’m in your shoes, that’s how I’m going to go at this.